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April 30, 2009

Lunatic

David Simon, Chief Patent Counsel at Intel, in testimony today before the House about pending patent legislation, comes off as a raving sociopath. Let's begin with his corporate arrogance, a pandemic disease among his Coalition brethren. "As one of America's leading innovators, Intel recognizes the critical importance of a strong and effective patent system that protects actual inventions and thereby provides an essential incentive for inventors... Too often, the patent law... is being used to extract unjustified payments from true innovators..." And who might the "true innovators" be?

For Intel, "true innovators" are decidedly not synonymous with inventors, but with manufacturers. Simon harkens back to a fictional idyll.

The patent litigation rules that govern today's lawsuits were adopted in a very different era, when claims virtually always were asserted by one product manufacturer against the manufacturer of a competing product, alleging that the defendant's product infringed the plaintiffs patent and was diverting customers from the plaintiff to the defendant. The principal measure of damages sought was the profits lost by the plaintiff due to the diversion of sales to the defendant.

In the 1853 case of Seymour v. McCormick, over a reaping machine improvement patent by a sole inventor, the Supreme Court set the stage for the current damages statute, §284, finding:

The basic theory of damages is to make the patent owner whole for losses caused by the infringer's illicit activity. The patent owner is to be restored financially to the position he would have occupied but for the infringement.

Patents by sole inventors asserted against companies have been as much the norm throughout our history as inter-company patent wars. Reasonable royalty has always been the baseline recovery, not lost profits.

Enter Intel's villain: non-corporate inventors.

The last ten years have seen a fundamental change in the litigation environment for technology companies, with the overwhelming majority of royalty demands, whether pre-litigation or in court, now asserted by non-practicing entities ("NPEs")-businesses that do not manufacture or sell products and that do not conduct research and development.

Of course, to invent, one must do research and development (R&D). There are no unskilled inventors. There are no inventors that did no research or development. Just as novice painter cannot pick up a brush and paint a masterpiece, so an inventor must be steeped in his art to achieve any aspiration of innovation.

A reasonable extrapolation is that Simon views Intel employees as slaves, who would be mindless without corporate backing. The reality is that the employees bring to employment strong skills, and, yes, further develop their skills as employees. But corporations are not innovators. Their employees are. Individual and small group inventors. Their names are on each and every patent. Almost no patent has more than a half dozen inventors, and most only one or two inventors. There are the true innovators.

Simon's irrational whine continues.

Why have NPEs targeted technology patents?

The answer is simple: because the presence of hundreds, if not thousands, of components technology-related products and the tendency toward standardization that allows technology products to interact-as well as the widespread use of technology by companies throughout the economy-allows NPEs to assert claims against multiple defendants based on alleged infringement of the same patent

The mid-1800s reaping machine had hundreds of components. Many companies made reaping machines at the time. And many were sued for patent infringement.

Patents lawsuits against multiple companies is nothing new. The reason it may appear more prevalent is because international competition is more fierce now than ever before. And, now more than ever, innovation spreads like wildfire in a chinook.

Simon cites recent cases providing "vivid confirmation of the NPEs' strategy." Exhibit number one: Odom v. Attachmate et al, "a suit against 28 software companies." Yours truly. Let's look at the facts.

This inventor spent twenty years as a software designer and developer, and wrote well over a half-million lines of code as a journeyman. For corporations. Currently eight patents to my name, in a variety of technologies.

Four years after Odom invented active tool groups for toolbars, Microsoft tried to patent the same invention. To my knowledge, Microsoft introduced the technology into the commercial marketplace with Office 2007. Microsoft actively promoted the technology with a licensing program, with some assurance to licensees that Microsoft owned the technology. The advantage abundantly clear over the prior art, active tool groups has been widely adopted by numerous companies as a worthy innovation.

How would Simon recompense inventors such as Odom?

This litigation effectively imposes a tax on the creation and use of innovative technology products.

Microsoft told Odom that his patents represented a "tax." Microsoft "set forth terms" for Odom to give Microsoft a license to all his patents. In return, they were willing to give: nothing. Zip. Nada. There's the patent tax that these mega-corporations deem equitable, with profit margins up to 80%, and marginal costs next to nothing (as much sunk cost is in R&D). Not a cent to inventors. The "true innovators."

Simon attacks the nearly 40-year case law precedent of Georgia-Pacific v. United States Plywood, accusing it of failing to provide for reasonable royalty, particularly where a product is made of numerous components to which multiple patents may apply.

The flaws in the Georgia-Pacific test are especially pronounced when the plaintiffs target is a complex product made up of many different components...

Let's look at some of the Georgia-Pacific factors to see what's included.

8. The established profitability of the product made under the patent; its commercial success; and its current popularity.

9. The utility and advantages of the patent property over the old modes or devices, if any, that had been used for working out similar results.

10. The nature of the patented invention; the character of the commercial embodiment of it as owned and produced by the licensor; and the benefits to those who have used the invention.

11. The extent to which the infringer has made use of the invention; and any evidence probative of the value of that use.

12. The portion of the profit or of the selling price that may be customary in the particular business or in comparable businesses to allow for the use of the invention or analogous inventions.

13. The portion of the realizable profit that should be credited to the invention as distinguished from nonpatented elements, the manufacturing process, business risks, or significant features or improvements added by the infringer.

Corporations take moral weaklings, blazing with ambition of power (such an illusion, that), then engender and empower them to heights of arrogance and deceit. People like David Simon, lacking any apparent sense of honesty, empathy, or equity, acting as a scourge upon humanity, to rake in as much profit as possible, without regard to others or the environment, beyond what facile civility and the law require. And there are a hell of a lot of them running large corporations in this country.

Posted by Patent Hawk at April 30, 2009 9:24 PM | The Patent System

Comments

I knew David in younger days. So it pains me to see him breathing heavy through the Darth Inte-vader suit.

The rebellious truth is that essentially no Intel inventor does "hands-on" manufacturing. The latter is done by non-inventor technicians in the bunny suits who get finished IC recipes and photomasks and who follow the recipes blindly and slavishly.

The "true" inventors at Intel are designers. They design. They "invent". They don't manufacture. They are NPEs. But because they signed their souls away to the corporate master when seeking employment, they magically became exempt from being labeled NPE. However they, the "true" inventors, are NPEs nevertheless. Shame on you, David. When did you cross over to the shaded glasses side?

Posted by: Annonymous at May 1, 2009 3:08 AM

Corporate America has always felt this way about independent inventors and small businesses. Previously, however, the PTO sided with the little guys ("small entities") on the Hill and in formulating legal policy to keep the big guys at bay and level the playing field so that true innovation could be fostered wherever it was found (i.e., outside of Microsoft's labs since none occurs within them).

Now, however, the agency finds it all to easy to sit idly by as the corporate giants have their way skewering these very same little guys. Since Bush II, America's inventors have no advocate whatsoever in the Executive Branch. Recognizing this, Big Business is now intent on capitalizing in the IP arena just as it did in the financial services sector, so that it can continue to leech the wealth from civilization without having to create any.

In this instance, they'll do it by repackaging other people's inventions.

Posted by: reaping at May 1, 2009 4:44 AM

Hawk,

Check out this post by Professor Adam Mossoff:
http://volokh.com/posts/1240974253.shtml

And for an even better read, his law review article at: http://ssrn.com/abstract=1354849

The article is about the "Sewing Machine Wars" of the mid-1800's, and discusses in detail the case of one individual inventor's battle with the industry.

Posted by: PA at May 1, 2009 5:00 AM

Hawk -- hasty decision to hit "Post."

My point is, if it isn't obvious, that Intel could benefit from a history lesson (as you've aptly pointed out).

Posted by: PA at May 1, 2009 5:20 AM

I metaphorically thought of Microsoft and Hawk, respectively, when I read this quote-- :-)

"Singer’s characteristically hotheaded nature asserted itself, he argued with Howe, and then he 'threatened to kick him down the steps of the machine shop.'124 The negotiations thus ended, and George Zieber later observed sardonically that 'Mr. Howe lived to be thankful for the exhibition of Singer’s amiable disposition on that occasion.'125"

Hawk, some free non-legal advice - for the long haul, you will probably do well to consider tightening up your claims even now if you have not already initiated such (not because of prior art necessarily, but rather because - under 112 - the claim language could be improved.)

Posted by: niRPa at May 1, 2009 5:49 AM

Check out this article:


"Of Trolls, Davids, Goliaths, and Kings: Narratives and Evidence in the Litigation of High Tech Patents" by Colleen V. Chen

for interesting statistics in high-tech patent litigation.

Posted by: Defector at May 1, 2009 2:07 PM

Hawk,

With your statement, "Four years after Odom invented active tool groups for toolbars, Microsoft tried to patent the same invention." are you saying the PTO used your app/patent (either solely w/102; or with other prior art w/103) to block MS's app?

If so, could you share MS's app #?

I'm looking at the same potential situation, but with Google.

Posted by: Fellow Pro Se at May 2, 2009 7:55 AM

Fellow Pro Se,

2006-0036965, Jensen Harris.

The last time I looked, PTO had not applied my toolbar patents to Microsoft's ribbon patent applications. Examiners are generally sloppy prior art searchers.

Microsoft has struggled getting its Ribbon patents. Nothing new there. Any that slip through are easy reexam targets.

Posted by: Patent Hawk at May 2, 2009 10:27 AM

Thanks, Hawk.

Since I didn't become aware of Google's filing w/in the allowed 37 CFR 1.99 time period to put a notice directly in their file, the IAC & OPLA advised me to instead place a notice of my priority in my file so it'd be of record with the office; saying that I in fact have/had an actual duty of candor and good faith under 37 CFR 1.56 to do so.

Google's examiner also appreciated letting him know about it as well.

E-mail me if you'd like to take a look at my notice/wrapper, and I'll give you my app #.

Posted by: Fellow Pro Se at May 2, 2009 2:39 PM

Mr. Simon suffers from the same ignorant mentality a great deal of major corporations suffer from...interestingly, the ones caught infringing.
They all cry "Troll" or some other colorful name, and cry "its unfair". Last I read, a patent gives an inventor an exclusive right to do whatever he feels with it, practicing or not.
Most inventors don't practice the actual manufacturing, etc. They seek out corporations to do so...
...the reality is that alot of times the idea is simply taken from said inventor...then practiced by an infringer (who later cries how unfair it is to be found guilty of infringing).
Mr. Simon would like it to appaer that the inventor saw the Idea at Intel....copied and patented it....then came looking for a free ride or something.
Wouldn't the inventing have to happen first, then the infringing??....(or am I missing something?)...

....yes, I guess I am...
...David Simon is a "paid discrace" to the patent community.

Without inventors and patents (practicing or not)...he'd be out of a job... wouldn't he.

Practice that Mr. Simon

Posted by: The Inventor at May 4, 2009 3:02 AM

An interesting read which includes numerous examples of why the corporate NIH attitude has formed and why it is bad for the economy, as well as other sage wisdom on the need for a strong patent system is found in "The Invisible Edge: Taking you Strategy to the Next Level Using Intellectual Property," (Portfolio, March 2009).
http://www.the-invisible-edge.com/about_us.html

Posted by: Lakeguy at May 4, 2009 7:11 AM

I sent the following to Senator Leahy for congressional records on the 2009 Patent Reform legislation hearing. The Lunatic article should also be sent to his attention for inclusion in the hearing records.

May 1, 2009

Senator Leahy
Chairman Senate Judiciary Committee
433 Russell Senate Office Bldg
(at Constitution and Delaware)
United States Senate
Washington, DC 20510
(202) 224-4242

Dear Senator Leahy

I express my comments regarding the testimony of others before your committee on 2009 Patent reform legislation, as they relate to the use of the terms NPE and patent troll. I request that these comments should be included in the congressional records.

Recently there has been quite an interesting set of opinions about the meaning of term NPE and how it should be used. Almost all of it has been by academics. Let me provide an insight on the real and underlying meaning of NPE, from one who is an observer of the IP litigation scene, observer of the political scene, a non-practicing attorney, an independent inventor who prosecutes his own patents, and who is also contemplating major IP litigation.

In an adversarial court system the defendants as part of their defense tactics demonize their opponent, the plaintiffs’. The non-practicing entity (NPE) is such an adjective that had been used by one large defendant in the past, to describe their opponent as some one who is a “bad entity that does no good for the society, as opposed to them, who do good for the society by making products, to influence the public opinion, the judges as well as and juries in the courts in their favor. The large defendants use the defense of maligning the opponents’ character to equalize their own bad bullying behavior look good before the judge and the juries and in the court of public opinion after having stolen someone’s IP property rights. Peter Detkin when he was at Intel is credited with having coined the term NPE to attack the character of its opponents in IP litigation in this vein.

Since then the NPE or equivalent term patent troll has become a term to denigrate a plaintiff party in IP litigation against a large defendant implying that the large defendant do something good and useful for the society, and the NPEs by enforcing the IP rights of independent inventors and their patents against the large defendants do something wrong for the society. These terms are now used by their lobbying agents in lobbying congress to have laws passed that exclusively favor the large companies to the detriment of the society.

A well reasoned term for describing the character of these large IP litigation defendants would be “Big Bully” or BB when the behavior of these large defendants is put in proper perspective. BBs use their power and influence in many ways to corrupt the fabric of the society by gaming the court system and in lobbying congress to change the laws in their favor. An example would be their attempt to weaken the class action law suits, as well as twist the patent system solely to their favor through lobbying. One could say, that if the BBs have their unfettered way, one would not be able tell the country of US apart from a feudal society that exists even today in some parts of the world.

The history of IP litigation is filled with bullying behavior against the independent inventors, starting with the Thomas Edison. However, it is worth recalling one of the most recent Big bully BB case that of Blackberry and some salient facts, that are ignored while all that is remembered is the negotiated sum of 650 million dollars that RIM paid to NPT, the plaintiff, the e-mail patents independent inventor, after the independent inventor tried to negotiate in good faith with a demand for a sum of 28 million to settle the case of infringement. It was RIM’s bullying behavior, when it thought as a foreign entity it was insulated from US court system, and could drag this through the US court system for years and would be immune from any remedy. Let us also not forget that as part of that bullying behavior, the RIM reneged on an earlier settlement of 450 million, before they agreed to pay 650 million to avoid being shut down in the US.

From the independent inventor’s point of view RIM exemplifies big bully behavior and is by no means the only example of the big bully behavior, where, the 650 million was not a big enough 2 by 4 on their head to change their bullying behavior. An independent inventor would be happy with an award of 28 million and a 20 year jail term for the management team of RIM to curb their bullying behavior. To redress that big bully behavior, punishment laws that include substantial and exemplary fines and jail terms are needed against them for misusing and wasting precious court resources.

Tara Chand Esq. Managing Director
Internet Promise Group ® LLC
A high stakes innovation enterprise

chand@InternetPromise.com

Posted by: Tara Chand at May 4, 2009 7:12 AM

"20 year jail term for the management team of RIM" would be nice but it's not gonna happen

Patents are civil matter, not criminal

But the really horrible thing is total lack of accountability of corporate execs who willfully take other people's IP to boost corporate profits (and their fat salaries and bonuses)
When corporation is sued for infringement many years later those dudes are with some other company or retired in the Bahamas
Without making corporate officers financially liable for their decisions to steal other people's patented inventions they will just continue to do so

Posted by: angry dude at May 4, 2009 8:02 AM

One aspect of all of this which I have not heard mentioned is the fact that companies like Intel have cross-license agreements with many (most?) of their competitors. As a result, Intel is obviously going to see more patent litigation from NPEs than competitors. Not to mention the fact that these cross-license agreements can be very anticompetitive. For starters, they can make it very difficult for a new competitor to compete.

Posted by: metoo at May 4, 2009 8:44 AM

"Of course, to invent, one must do research and development (R&D). There are no unskilled inventors. There are no inventors that did no research or development. Just as novice painter cannot pick up a brush and paint a masterpiece, so an inventor must be steeped in his art to achieve any aspiration of innovation.

Substantial lu lz are to be had when viewing some business method and computer implemented "inventions" in light of hawk's statement here.

Hawk, to be sure, one could legitimately argue that an "innovator" actually practices what he invented. An "innovator" is someone who is "inventing" to do something, not merely inventing for the sake of inventing (or trolling for $). The speaker has a point, whether or not you like to concede it. And he still has a point even if it would do america harm if reforms to mirror his views were put into place.

"Patents lawsuits against multiple companies is nothing new. The reason it may appear more prevalent is because international competition is more fierce now than ever before. And, now more than ever, innovation spreads like wildfire in a chinook."

You think you're saying something against his position but you're really just supporting it :( It's sad to see people like yourself do this.

"Simon cites recent cases providing "vivid confirmation of the NPEs' strategy." Exhibit number one: Odom v. Attachmate et al, "a suit against 28 software companies." Yours truly. Let's look at the facts."

This is getting more awesome by the minute.

"Corporations take moral weaklings, blazing with ambition of power (such an illusion, that), then engender and empower them to heights of arrogance and deceit. People like David Simon, lacking any apparent sense of honesty, empathy, or equity, acting as a scourge upon humanity, to rake in as much profit as possible, without regard to others or the environment, beyond what facile civility and the law require. And there are a hell of a lot of them running large corporations in this country."

I suggest sending the man a more cordial email and discussing the matter man to man. Then post the discussion. Perhaps meet for coffee. Record it, with his permission.

Posted by: 6000 at May 4, 2009 9:59 PM

What I keep thinking about is that the big difference between NPE plaintiffs and PE plaintiffs is that the defendant is not able to defensively assert their own IP against the NPE plaintiff. So that makes the defendant much more vulnerable to attacks to NPEs, who are immune to defensive assertion of patents.

Plus, even if one were to require the NPE to make and sell a "straw product" that practices the claimed invention in order to assert the patent, shallow pockets of such NPEs would still permit them to refuse to effectively "cross license" by settling for what they would get if they were PEs.

It occurs to me that one way to remove all criticism of NPE plaintiffs, compared to PE plaintiffs, is to institute a damages calculation phase in which the defendant produces its own patents and alleges that the plaintiff could not possibly make a successfully marketable product practicing the claimed invention without infringing claims of the defensively asserted patents. For each defensivley asserted claim for which that is true, a determination can be made of a reasonable royalty for that claims, to be subtracted from the damages.

For this scheme to work, I think the plaintiff would need to have the option to go ahead and assert all of its patents and have damages be determined for all of them simultaneously in an attempt to accumulate enough damages to exceed the accumulated defensive royalties. Here, Courts would basically arbitrate a cross-licensing agreement on a body of patents, with a potential payout from the defendant to the plaintiff for any non-expunged damages. That would put NPEs more or less in the same shoes as PEs.

Has anyone proposed anything like that before?

Posted by: broje at May 5, 2009 9:41 AM

broje that scheme is entirely too fair for any self respecting NPE to shine to. Furthermore, you'd probably never even have an actual trial because 99% of NPE's would be shut out by even the minimal defensive protections. And how does the scheme take into account the manufacturer being sued by a plantiff where the manufacturer is taking a license to other people's patents in order to make the product? Are those patents able to be used defensively on behalf of the whole industry that is using those techs collectively (presumably all with licenses). If so, that would probably kill off the other 1% of NPE's.

Posted by: 6000 at May 5, 2009 10:03 AM

In answer to your question, the big corporation can be an NPE or a PE on a patent by patent basis. Thus, I think it would be prohibited from defensively asserting a patent that it does not practice. I don't see why it would matter whether the defendant bought the patent rights from someone else. I mean, that's effectively what the stereotypical, so-called "Patent Troll" does by snapping up the IP at auction and then asserting it against the big corporations. Why shouldn't the defendant be permitted to purchase patents from others and defensively assert them? But note that they are purchasing a patent that they must practice in order to assert it defensively. If they were already practicing that patent, then they were infringing it. So there is a bit if a synergy there, in which the big guys are encouraged to license patents from others for defensive purposes. The goal is to get the big guy to license the patent from the NPE for a fair price. Allowing that defendant to then assert that patent defensively is incentive towards that end. Grnated the small guys will most likely need to pool their patents together in suit to get anywhere, but we already have entities in business to do just that. You know who I am talking about. They will buy the patents form the small inventors and get their fair share acting as patent brokers. Everybody wins.

Posted by: broje at May 5, 2009 10:54 AM

I enjoyed this article immensely. IBM, Intel and other corporations are not true innovators. And as other's have stated above, they in many ways resemble the patent trolls they criticize.

Posted by: Ken at May 7, 2009 2:26 PM

Friday funnies: Mr. Simon and Steve Perlman (!) on video:

http://link.brightcove.com/services/player/bcpid22364960001?bctid=22402118001

[Basically, Simon says (surprise, surprise) juries can't be trusted... Yes, we trust YOU Mr. Simon.]


Hat tip: Peter Zura.

Posted by: niRPa at May 8, 2009 4:46 AM